Kiva, a pioneer in making microlending participation possible for almost anyone in the USA at $25 at a time, has focused to date on lending to microbusinesses in developing/low-resource countries. Many of these loans were a few $100’s with the largest around $1,000 per individual business.
Recently has begun facilitating loans to low-income self-employed entrepreneurs in the USA. Note that these loans are really not “microloans” with the current loan sizes of $1,000 to $10,000 with median around $5,000-$6,000. These appear to be instead unsecured loans to businesses which have no access to credit.
Here are a couple of examples:
Anibal is raising $4,500 for his decorative painting business
Carl is raising $4,000 for his window washing business
I think this is going to be an interesting experiment. Clearly there are challenges for many USA small businesses getting access to capital which has only be exasperated with the current financial credit crunch. It will be interesting to see what the repayment rates are going to be on these loans.
Does the higher capital requirement result in a lower social impact?
One things about microfinance pointed out by A Billion Bootstraps book is that lending a $100 goes a LOT further in terms of number of lives impacted in a low-resource country than in a developing country where the capital needs appear to be on the order of 10x higher.
Small services businesses often need capital for purchasing equipment
Still, I think that this is an innovation for financial services worth watching. As many of you know, I recently launched a new website for helping homeowners find recommended local plumbers, home cleaners, painters, locksmiths, handymen and much more called HelpHive.com. Our marketplace is attracting a range of services businesses from the national chains all the way down to the smallest window washers, lawn care specialists and pressure washing specialists. These smaller business are often single person businesses sometimes hiring a helper or two. Many of them have needs to purchase equipment which they could easily afford through earnings if they had access to financing. Kiva might be their answer … much better than the payday loan vultures or the loan sharks!
What do you think about the opportunities or challenges for microcredit in the USA?